Budget: Government confirms plan to raise pension eligibility age

Canadians under the age of 54 will be forced to wait longer to qualify for their Old Age Security pensions, Finance Minister Jim Flaherty announced Thursday.

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OTTAWA — Canadians under the age of 54 will be forced to wait longer to qualify for their Old Age Security pensions, Finance Minister Jim Flaherty announced Thursday.

The controversial shift means that starting in 2023, the age of eligibility for OAS benefits will gradually increase to 67 from 65.

With an 11-year "notification" of that change and a six-year phase-in that concludes in 2029, Flaherty said he has given Canadians "ample time to make adjustments to their retirement plans."

Flaherty also announced a new measure that will permit Canadians to delay claiming their OAS until later in life and, in return, be rewarded with higher benefits.

The purpose is twofold: Keep Canadians in the workforce longer to boost the economy and provide taxes to government, and limit the costs of the OAS system by ensuring there are fewer beneficiaries.

In an apparent move to blunt some of the public uproar, Flaherty announced that pension plans for public servants will be changed to require that the employees pay a larger contribution: 50 per cent.

As well, the pension plan for politicians, often criticized as an overly generous "gold-plated" scheme, will be adjusted, starting in the next Parliament, so they are "comparable" with contribution rates made by public servants.

However, there were no details on precisely how much of an increased share the MPs will bear in contributions, or whether they will lose two attractive elements of their scheme — qualifying for benefits after just six years in office, and claiming the money at age 55.

The controversial shift in OAS, the backbone of Canada's public pension system, was first telegraphed by Prime Minister Stephen Harper in January but details didn't come until Thursday.

Flaherty argued the changes are needed to ensure the long-term sustainability of the pension system. He told the Commons the OAS program was designed decades ago for a "much different demographic future."

In the 1970s, there were seven workers for every one person over the age of 65, he said. In 20 years there will be only two.

Similarly, in 1970, life expectancy was age 69 for men and 76 for women. Today, it is 79 for men and 83 for women.

"The result is that Canadians are living longer and healthier. There are fewer workers to take their place when they retire. Canada has changed. Old Age Security must change with it, to serve the purpose it was intended to serve," Flaherty said.

Opposition parties say he is creating a "false crisis" and immediately mounted fierce attacks. NDP leader Thomas Mulcair said Harper had violated a promise to not touch pensions.

"But today we learned that the word of the prime minister is worth nothing," said Mulcair. "It's totally inadmissible that in a country as rich as Canada we still have so many elderly people who are living in poverty. Mr. Harper prefers there would be more."

Interim Liberal leader Bob Rae said many Canadians, especially those in "physical industries," won't be able to work beyond 65 and would end up on provincial welfare rolls.

"I don't know too many construction workers who are working past the age of 65. I don't know too many factory workers who've been on the line since they were 17 or 18, who are going to be working past the age of 65."

The pension changes are as follows:

- Starting on April 1, 2023, the age of eligibility for OAS and the Guaranteed Income Supplement (GIS) will gradually change to 67 from 65.

- This means anyone who is 54 years or older as of March 31, 2012, will not be affected.

- People born between April 1, 1958, and Jan. 31, 1962, will become eligible to receive OAS benefits between the ages of 65 and 67, depending on their actual birth date.

- People born on or after Feb. 1, 1962, won't be eligible for OAS until age 67.

- Eligibility for the allowance given to low-income spouses or survivors will gradually increase to 62 to 66, starting in April 2023, from 60 to 64 today.

- People can voluntarily defer receiving their OAS benefit for up to five years, starting July 1, 2013. If so, they will be subsequently rewarded with a higher, actuarially adjusted pension. For instance, someone who defers retiring at age 65 for one year (to age 66) would receive $6,948 in the annual OAS pension instead of $6,481.

In recent weeks, political critics have said the OAS changes will merely off-load costs to the provinces, because more seniors will be forced onto provincial welfare rolls when they turn 65.

Flaherty has responded by promising to "compensate" the provinces for any "net additional costs" they face as a result of the change in OAS eligibility.

On Thursday, one pension expert panned the OAS announcement as an "unfair and regressive change that will increase poverty and most hurt lower-income seniors."

"The budget talks about healthier Canadians living longer and longer," said Ken Battle, president of the Caledon Institute of Social Policy.

"Well, the fact is the poor seniors are less healthy than others, have lower lifespan and have less time in which to enjoy their Old Age Security benefits."

Gregory Thomas, federal director of the Canadian Taxpayers Federation, was critical of the government for not going far enough in reforming the MPs' pension plan.

"Essentially, government MPs are sending Canadians a signal that they continue to be a privileged class who write their own rules," said Thomas.

"Obviously, there are a lot of government MPs who feel entitled to their entitlements and they want to cling to a gold-plated pension."

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